Lithium Miner SQM Sees Higher Revenue on Positive 2022 Price Environment

Chile’s SQM (NYSE:SQM) posted a more than 770 percent revenue increase from its lithium business, reaching US$8.15 billion on the back of a positive price environment for the commodity in 2022.

The top lithium producer saw record-high sales volumes of almost 157,000 metric tons (MT) of lithium last year, 55 percent higher than 2021, with prices reaching an average of nearly US$52,000 per MT.

“Fundamentals behind demand growth are strong, with sales of electric vehicles growing in all the markets, especially in the US market, positively impacted by the Inflation Reduction Act, letting us believe that demand this year should grow more than 20 percent when compared to 2022,” the company said in a statement.

The Inflation Reduction Act was signed into law last year in another move by the US government to develop its domestic lithium-ion supply chain. The legislation requires automakers to have 50 percent of critical minerals used in electric vehicle batteries come from North America or US allies, including Chile, by 2024.

SQM, whose primary lithium business is in the South American country's Salar de Atacama, said it will invest about US$1.4 billion from 2023 to 2025 to increase its lithium capacity to 210,000 MT, including 100,000 MT of lithium hydroxide capacity.

“As electric vehicle sales continue to grow, we now expect the lithium demand to reach almost 1.5 million metric tons by 2025. This strong demand growth expectations give us confidence as we remain focused on expanding our lithium production capacity,” CEO Ricardo Ramos said in a Wednesday (March 1) press release.

Aside from its lithium brine operations in Chile, SQM is also developing the Mount Holland lithium project in Australia, which is known as one of the world's largest hard-rock mining deposits, in a joint venture with Wesfarmers (ASX:WES,OTC Pink:WFAFF). Spodumene production is expected to begin this year, with hydroxide production targeted for the first half of 2025. Between 2023 and 2025, the company plans to invest close to US$450 million in the asset.

Last month, SQM’s rival Albemarle (NYSE:ALB) published its quarterly results, saying it expects lithium prices to remain high. Similarly, US-based Livent (NYSE:LTHM) is forecasting prices to remain at elevated levels in 2023.

Most lithium companies have seen momentum increase in the past year, with some lithium stocks in the US, Canada and Australia seeing noteworthy year-to-date gains.

On Thursday (March 2), shares of SQM were trading at US$85.68, up more than 6 percent year-to-date.

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Securities Disclosure: I, Priscila Barrera, currently hold no direct investment interest in any company mentioned in this article.